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Gagging the messenger

24 January 2013 By Antony Currie

Wall Street has found a new way to put shareholders second. While many banks are finally bowing to pressure to restrain compensation, Goldman Sachs and JPMorgan are now trying to stifle investors from voting on legitimate matters at their upcoming annual meetings.

Goldman asked the Securities and Exchange Commission for permission to omit a proposal that would require it to appoint an independent chairman. JPMorgan, meanwhile, wants the regulator to let it remove from its proxy an initiative to have the board of directors explore “extraordinary transactions that could enhance stockholder value” – in other words, a breakup.

Both suggestions are rational topics for debate. Calling for a bank to split the roles of chairman and chief executive is hardly a new concept. Last year, Goldman and Lloyd Blankfein, who holds both titles, negotiated their way out of putting the issue to shareholders by striking an agreement with aggrieved investors to revise slightly board oversight of executives.

Meanwhile, shareholders seeking ways to improve returns aren’t revolutionary either. Headline-making activists like Bill Ackman and Dan Loeb do it all the time. Sure, JPMorgan performs better than many of its rivals, delivering an 11 percent return on equity last year despite a whopping $6.2 billion trading loss. Even so, the bank’s shares still trade just below book value, a figure that essentially represents what the disparate parts should fetch if sold off.

Yet both Goldman and JPMorgan are claiming the ballot initiatives are, among other things, too “vague.” That can happen with flighty individual investors, but isn’t typically the case from established investors like union adviser CtW and the AFL-CIO, which put forward the two questions this year.

What’s odd is that both banks have made their cases before. JPMorgan boss Jamie Dimon regularly addresses why he thinks carving up big institutions isn’t the answer, including in his annual missives to shareholders. Goldman, like others, reviews its leadership structure each year.

If the crisis made anything clear, it’s that banks should be forced to defend their business models and corporate governance – regularly. Fighting to suppress such questions only makes it sound like these supposedly master sellers are afraid they can’t close.


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